Final answer:
Interest rate risk is the risk related to uncertainty about future interest-rate movements. It can affect the profitability and value of investments such as bonds and loans.
Step-by-step explanation:
The risk that is related to the uncertainty about future interest-rate movements is called interest rate risk. Interest rate risk refers to the danger that an investor may experience losses due to changes in interest rates. It can affect various financial investments, such as bonds and loans.
For example, let's say you buy a long-term bond with a fixed interest rate of 5%. If market interest rates suddenly rise to 8%, the value of your bond will decrease because it is now offering a lower return compared to other available investments. On the other hand, if market interest rates drop to 3%, the value of your bond may increase because it offers a higher return.
Overall, interest rate risk is an important consideration for investors as it can impact the profitability and value of their investments over time.